Former trader ordered to pay $11.6 million

(Crain's) -- A former commodities futures trader, reduced to delivering pizzas with his parents' car, has been ordered by federal regulators to pay $11.6 million in federal fines and restitution to investors the agency says he defrauded.

Edward Velazquez, who once ran three hedge funds from his Chicago home, was told by the U.S. Commodity Futures Trading Commission to return $6.6 million to investors and pay $5 million in civil penalties. The CFTC announced the consent order on Thursday after it was entered into the court record on Jan. 31.

In agreeing to the terms of the CFTC's consent order, Mr. Velazquez neither admits nor denies the allegations of wrongdoing.

Neither Mr. Velazquez nor his attorney was available for comment.

The payments are the outcome of a suit filed in September 2004 against Mr. Velazquez and his three firms: V-Tek Trading Group Inc., V-Tek Capital Inc. (IL) and V-Tek Capital Inc. (BVI).

The suit alleged that Mr. Velazquez misled investors by making false and deceptive statements about his companies and investment strategy and that he misappropriated funds for personal use.

At least 121 customers gave Mr. Velazquez a total of more than $8 million to invest, according to a CFTC statement. The defrauded investors have since reclaimed roughly $2.48 million, the commission said.

The rest of the funds could be difficult to reclaim.

Mr. Velazquez was living at his parents' house and using their car to deliver pizzas, according to a court document filed in July.

"It is unlikely that Mr. Velazquez will be able to satisfy the consent order in the near or distant future," his lawyer wrote in a court document filed Tuesday.